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Thank you for standing by, and welcome to the Woolworths Group F '19 Q1 Sales Announcement Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Brad Banducci, Managing Director and CEO of Woolworths Group. Please go ahead.
Good morning, everyone. Thank you for joining us this morning for the Woolworths Group first quarter sales results for F '19. Joining me in the room this morning are David Marr, our Chief Financial Officer; Claire Peters, Managing Director of Woolworths Supermarkets; Amanda Bardwell, Managing Director of WooliesX; Natalie Davis, Managing Director of Woolworths New Zealand; Dave Walker, Managing Director of BIG W; and last but not least, Steve Donohue, Managing Director of Endeavour Drinks. Today, we are reporting group sales from continuing operations for Q1 of F '19 of AUD 14.9 billion, up 1.9% on the same quarter last year. It has been a more challenging quarter for us with a slow start. However, our customer and brand metrics have remained strong, and we're starting to build momentum as we go into the critically important festive season. Despite the challenging start, Australian Food's Voice of the Customer scores remained resilient throughout the quarter, with our Voice of the Customer Net Promoter Score increasing by 8 points, compared to the same time last year, and our store-controllable Voice of the Customer at 82%, up 1 point on the prior year and in line with our June record results. Australian Food sales for the quarter were AUD 9.9 billion, an increase of 1.9% on the previous year, comparable sales increased by 1.8%, and were impacted by the removal of single-use plastic bags and a competitor continuity program in August and early September. Despite this, we have been pleased with our recovery in sales momentum in the second half of September, which has continued through into October.While there has been an adjustment period for customers due to the removal of single-use plastic bags, the majority of our customers have been supportive of our decision to do the right thing for the environment with over 600 million fewer single-use plastic bags now in circulation, and that number, of course, is growing every day. Through the sales of our Bag for Good which we launched on June 20, the money raised has been committed to Junior Landcare, delivering the first round of 500 grants to help young Australians become involved in gardening and recycling programs. In addition, with the help of our customers, we have also supported our farming community with over $7.5 million raised through our various drought relief efforts and additional funds which have been raised through our recent efforts in relation to dairy and our special drought relief milk. WooliesX continues to perform well with online sales in Australian Food up 26% from last year, supported by pickup and the continuous improvement of our online shopping experience. We are making good progress on meeting our customers' needs for ultra-convenience with the launch of a refreshed Woolies app and express delivery pilots, in Sydney and now in Melbourne, and the trial of Scan & Go at our Double Bay supermarket. During the quarter, in addition, Woolworths Online was awarded the Canstar Blue award for the most satisfied customers and ranked first for online grocery delivery by Choice Recommended. We completed 15 renewals in the quarter, and I encourage those who get up to Brisbane to visit our latest renewal store in Ascot, which is a further build on our Marrickville Metro concept. And for those of you in Melbourne, our Camberwell 3.0 renewal will open on the 23rd of November. Endeavour Drinks reported comparable sales growth of 1.7% for the quarter, driven primarily by a low growth drinks market and the inclement weather we've experienced across the Eastern seaboard of Australia, in particular in July and August, and continuing certainly in New South Wales into September. Sales increased 3% to $2.1 billion, and online sales continued to deliver double-digit growth. During the quarter, BWS On Demand was rolled out to 472 stores, with plans to reach over 500 by Christmas.Moving to New Zealand. New Zealand Food had a strong quarter with total sales increasing 2.6% to $1.7 billion despite an increase in deflation, and comparable sales increased 4%. Total sales were impacted by the closure of 3 stores in the second half of 2018 and another store in the first quarter of this year. Online sales growth remained incredibly strong in the quarter, up 40% on last year, supported by strong growth in pickup.BIG W sales increased by 1.3% in the quarter to $902 million, with comp sales increasing by 2.2%, driven primarily by growth in Leisure and Kids. Summer lines have not performed as well given the cooler start to the season, but that is starting to change as we go into October. All key customer metrics remained stable or improved in the quarter as BIG W continues to make progress in the turnaround.Hotel sales for the quarter were $443 million, an increase of 0.5%. Comp sales increased by 1.2% with growth slower than recent periods as our Hotel business cycled 2 major televised sporting events from the prior year. Petrol sales increased 8.2% to $1.3 billion for the quarter, with comp sales increasing 8.1%, benefiting from record high Petrol prices. Volumes were impacted by lower tank fill sizes due to the higher fuel prices and competitor store openings.In summary, while a challenging quarter for the group at the sales levels, we are pleased with the continued strength in our customer and brand metrics and the improved sales momentum we experienced towards the end of the quarter. We have strong plans in place for the lead-up to Christmas and the New Year to deliver the best possible in-store and online experience for our customers. And I would like to thank our customers and team for their ongoing support, especially in helping us do the right thing for our communities and environment. I will now turn the call over to questions, and can I ask that you limit your questions to 2 per person and rejoin the queue if you have any thereafter.
[Operator Instructions] The first question today comes from Shaun Cousins from JPMorgan.
Just a quick question. Just regarding, I guess, sort of how you're seeing Voice of the Supplier trends, particularly given, I think, there were some concerns maybe raised in the Advantage survey earlier this year about a request for Woolworths to remain humble, and there appearing that, that might not have been the case, particularly given the efforts on the part of Woolworths to sort of ask suppliers to mitigate 100% of price rises as well as -- and sort of refusing to raise prices. And then, there's another issue, which is separate, around data supervision, which is a bit more long-dated. But I'm just curious around how you're seeing your Voice of the Supplier metrics, please.
Yes. Thanks, Shaun, and thank you for the message. The good thing about where we are at Woolworths is we get very constant feedback from customers, our team and our suppliers, and that gives us the ability to really make sure we adjust and focus on continuing to improve across all aspects of our business. It would be fair to say that our July Voice of the Supplier scores did flatten out, and there were some good feedback and some good watch-outs that we saw in those results. We've just received our September Voice of the Supplier scores, and we've seen a material improvement across those scores, primarily as a result of the feedback we got from suppliers in September and also our aspiration to continue to improve. So there's no doubt, across all aspects of our business, we need to continue to improve. But as I say, the feedback we've just received from our suppliers shows that the corrective action we've put in place over July and August has put us in good stead. But as always, we need to be diligent and focused on making sure we get the right balance with our suppliers.
Great. And my second question, just, I guess, around food like-for-like momentum. Obviously, things got a bit better. I think it's -- you might have done around 2.3% in the back half of that sort of first quarter. I mean, maybe to think about the months and how they played out, in terms of July and, I assume, August were quite rough. But in -- did you see any improvement during the quarter? And maybe what do you mean when you say solid in October? Is that really more that the September trends continued in October or it's something else? I'm just curious about how you saw the months play out. And then also what do you mean by solid?
Thanks, Shaun. It feels like a long time ago now we had Q1, truth given, that we are just exiting the month of October. But it was a challenging start, as we alluded to in our full year sales results, with the pain and learning we all got out of the transition out of single-use plastic bags. So that caused us some challenges going into the month of July, and you would recollect we made the decision to phase them out on June 20. So we found some challenges from there. We then were impacted, as you would also be aware, by our competitor's continuity program and our decision to move our Earn and Learn program into calendar year F '19. And so we had those combined impacts. And that's what you saw when we reported our results for -- I think it was the first 7 weeks. Clearly, as we transitioned out of the continuity program of our key competitor and also as our customers got used to, and we got better at actually just managing, the transition out of single-use plastic bags, we saw our sales momentum start building, and we saw our market share start going back to where we had experienced it in June. And we've seen that trend continue into October.
So your market share in October is higher than September, is that what you're saying there?
We're not getting into the specifics, but we certainly have seen a bounce-back in our market share as we've got back into a more normal trading environments. And it is trading broadly in line with the trends we saw in mid-June prior to all of the volatility we experienced in June and -- July and August.
The next question comes from Michael Simotas from Deutsche Bank.
Just to follow on from Shaun's question earlier, if I can. Brad, I think you made a comment during your address that you saw an improvement from mid-September which, when we look at the like-for-like that you've reported as well as that comment that market share is back to June levels, it does imply some fairly robust growth in the back end of September. Was that a bit of a catch-up or has that sort of growth continued into October?
Thanks, Michael. I -- you can obviously back solve for what improvement we saw in the second half of September. As per my -- the comments in our results, we have seen some continued momentum into October. In terms of how you look at that in a headline rate, we're not in the business of giving, as you know, forward guidance on those numbers. The only point I would make is that, across the group, if I look at Q1, it was a relatively subdued consumer environment. So there were a number of headwinds we saw across the group at the consumer level. Surely, the inclement weather didn't help on the Eastern Seaboard. Some of the drought issues where it impacted all our businesses out in some of the more regional areas, whether it's Northern New South Wales or some parts of Queensland. Some of the political uncertainties clearly haven't helped us as well as the record high fuel prices. So relatively subdued consumer environment is the way we've seen it. There's nothing, certainly, to be alarmed about from our perspective. But that's the only other factor that you need to take into account as you look at the numbers going forward.
Okay, now that's helpful. And then the second question from me. There are plenty of anecdotes out there that your competitor's program drove significant pantry stocking. Is there anything in your data that's showing that? And do you think that's unwound yet or is that still likely to unwind over the coming weeks?
Yes. There's nothing, Michael, in our data that can either dispute or prove that thesis. We've certainly heard the same one. We are very focused, of course, on looking at basket size, which is how you would expect to see it manifest. But as our customers bounce -- come back into the business, we aren't seeing any noticeable differences in the trend by segment on basket size. But I just don't have any data on that one, to be honest with you.
The next question comes from Bryan Raymond from Citi.
My first question, just around operating cost growth that you guys might have seen in the first quarter '19. I mean, we've talked a lot about plastic bags in particular. And scan rates, I'd imagine, have slowed as a result with the single-use plastic bags coming out. So -- and you have mentioned queue times improving in your release. So I'd just be interested to see if there's been any move in your labor hours in store to adjust for this or to improve service levels and really offset that slower scan rate or if there's been any other cost investment that you've made over the quarter.
Thanks, Bryan. It is incumbent to me to point out to you that this is a sales call and not a profit call, and February will roll around all too soon from our perspective to talk about cost. But just a couple of points I would make. We obviously invested materially in the last couple of years in rolling out our 1Store system, which includes 1POS. Now that system could and should over time drive quite a lot of increased speed at our check-outs. And what we found, as we went into July and we realized some of the dissonance our customers and team were having on getting used to single-use plastic bags, we chose, had a conscious choice, to not try and realize any of those scan benefits. So we have delayed any conversation on scan benefits while we refocused on making sure our customers had a great experience at our check-outs. And I'm pleased, really pleased with the team's efforts in this regard to see that our queue wait times, Voice of the Customer satisfaction exited the quarter the way it did before the effect of the single-use plastic bags. So we had to defer any benefits we might have from one store, and that's the way it really played out for us on the front-end. In terms of other costs, there's nothing I can call out at this stage that we won't talk about in February. I would presume in February we should talk about the enterprise agreements, and what that -- how that will impact our business. Of course, we're still waiting to get validation from Fair Work Australia on that. But nothing else specific, I think, I can call out right now.
Okay, my second question is on BIG W and the continuation of strong like-for-like momentum relative to history for that business in its turnaround. I just want to make an observation. I mean the 2-year stack of that business has really accelerated because you are cycling a strong number from this time last year, maybe if you strip out the timing of toy sales. So -- and if I look at the breakdown of your like-for-like growth, the ASP or inflation component of that growth looks to have been fairly flat if you take out the impact of plastic bags. So I just want to understand what you're doing around pricing in BIG W at the moment? Have you been easing off on price investment? And what have you been seeing from your customers, particularly given September? Our feedback has been September was a bit softer in terms of clothing sales across the board. And so yes, just interested in the dynamics of that growth and how sustainable that 2% plus like-for-like momentum you have.
You are right. If you look at it in a 2-year sense, you see quite a pleasing number. As you well know, in this kind of department stores though everything does come down to the critical second quarter. It's true across our business, but that is the part of our business most leveraged to the second quarter. But it is a good 2-year trend, and we're seeing some pleasing momentum in our customer metrics as well. If I come back to the whole issue of price, we are continuing to invest in our proposition, and we've got just over 4,500 items now in our key value line program. And so that has continued to expand and to become a critically important part of the value proposition we're trying to deliver to our customers. The reason you don't see that in ASP is really the mix issue in the first quarter which we called out. We saw very pleasant strong growth in Leisure and Kids. And some of those leisure items, which would include things like TVs, and things like that, have got very high average sales prices. So I wouldn't read too much into that. It really is the mix. And in relation to apparel, the issue there, of course, has been the delayed summer that we've had and, therefore, the delayed uptake in all of our summer lines, including our summer apparel lines. But as we're starting to see the weather improve in October, we're starting to see that slowly -- or actually, not slowly, materially improve.
Your next question comes from David Errington from Merrill Lynch.
Brad, I'm just looking at WooliesX, and I'm trying to interpret what's going on in the business and not asking you to do my job for me, but I'm not -- if you could help me out in the way we should read this. When we look at the total growth in supermarket or food sales, it was $186 million. And yet -- and you've recorded WooliesX now as a stand-alone business, there's growing sales by $70 million. Now that -- now I know that this quarter was a bit disrupted because of Little Shop and all the rest of it. But just under half your sales growth looks to me to be coming from online. And that's despite like 3 net new stores and 15 refurbishments and a heck of a lot else going on. Is -- what's your view here? Is it potentially that online growth is going to make up the vast majority of your growth going forward? And how do you think about that when you're doing store refurbs and stuff like that? Is it more the investment that you're putting forward is now accommodating customers being online? I'm just interested if -- how we should interpret that WooliesX number, because it looks to be a vast chunk of your sales growth of food now.
Thanks, David, and we're on a journey to provide more transparency into WooliesX, so I'm sure many of you will give comments to Paul after this meeting on whether we are doing that and how we fine-tune it. If I look specifically at the quarter -- and I'll come back to commenting on renewals, digital is a key part of the growth for all of our businesses, and that's unavoidable. What, however, I should call out is that a lot of the growth that you see in WooliesX related to pick up from a store. So it was really was a collaboration between our digital business and our Supermarket business that created most of the growth. And it really was -- you may recollect, it's literally just over a year since we rolled out pickup. We're just getting better at that store experience for pickup, and it's resonating with a lot of our customers. So most of the growth is actually coming out of the store, but it's just a more convenient format of coming out of the store. And I think there was about -- I don't know if we called it out, but the material chunk of our growth really didn't come out of the annualization and material lift in pickup. In terms of what it does mean for the future, it is informed in our renewal program, and it's something that we're all working very hard on to make sure that the renewal program presents stores that are fit-for-purpose for the future. If you get up to Ascot, for example, what you will see at Ascot, hopefully, it's a very pleasing store and it's got great customer and team metrics, but you'll see a really terrific drive around the back end with a very seamless experience for our customers. There's still some more work to do on signage and a few things we need to work through with the landlord, but you'll start seeing a much better vision of the future. So we started to really think about how we design the store so that we can have a great and seamless pickup experience, ideally to the bridge experience and trying also to get the right backroom efficiency, which we haven't quite managed to do in Ascot but we certainly aspire to do in future stores. So there's no question that online, in its broadest manifestation, is key to our future, it provides a lot of growth. But it will -- and -- but we are now factoring that into how we design our stores as well.
Just a follow-up to this, and then I want to ask you a question on wholesale because I listened to Caltex the last 2 days, and they're really bleeding on about what's changing in the next week or 2 with they're going online with your customer loyalty program. But just a follow-up, where are you in terms of world's best standards in online? I mean, obviously -- where are you compared to where you need to be in terms of being able to satisfy customers' needs online?
I think it's a great question. Can I be a politician and answer a slightly different one, and then come back to that one. What I can...
I just want you to be Brad Banducci, the one that gives us a straight down-the-line answer. Brad's not -- those politicians of Australia aren't doing that well at the minute, so.
Okay. I shouldn't have used that analogy. Who knows when world's best practices are changing continuously. All I can tell you is that we had a really good quarter on improving the online experience in every aspect of it. The digital experience of coming to our website and the way that you can interface and quickly draw down the items you ordered before, so the reorder function, the fact that we've got now post, pick, pay so we don't have to get into refunds for out-of-stock situations, the in-stock availability, the delivery performance. Every aspect of our digital experience has materially improved, the new app. So we're really seeing great improvement across the experience, and it was kind of good. I don't place much credence, in general, on awards. But it is good that we got both Canstar and Choice, who are pretty tough marketers, to recognize the improvements we had. So we've materially improved the online experience. As you would well know, David, that's reflected in our cost of doing business investments from last year. So it's part of the dividend we're starting to see come through. And we have a great program going forward in the next 3 quarters on things we're still doing. If you come back to world's best practice, to be honest, there's such rapid change going on right now. There couldn't be a more exciting time, but it is really -- also a really interesting intellectually challenging time, which are the next enhancements we roll out. In truth, we've talked about express or on demand offer that we've rolled out now to 35 stores across Sydney and Melbourne. The uptake has been fantastic. How we operationalize that is something that's really challenging us. We've seen the same with our Scan & Go trial in Double Bay, great repeat purchase, great satisfaction, again, how we scale it up in a sustainable way. So I think that the finishing line is changing all the time. But what is really interesting about it, trend line from us, is how you stitch together the physical stores and the digital experience, that's where the action is. They're merging more and more. They're not getting separate. And so how we do that and which is the plan is the key. And in that regard our rewards business, it's critical. So we are now using the rewards database to personalize the experience in the website and in the app. And how we really mesh those together with the right privacy settings for our customers is probably the major focus we have right now in the business.
Okay. Just on wholesale, I was -- participated in Caltex's 2-day strategy. And they're really talking up, obviously, as their key future strategy, the rollout of Metro. And obviously, key to that is the whole package of tapping into your rewards card for their customer. They're talking up effectively you guys providing the wholesale of all those 250 stores, which is over $1 billion of sales, et cetera. Is wholesale going to develop into -- I mean, Woolworths was into wholesale, what, 10, 15 years ago, then you exited it. But are you going to have to create a new wholesale division? And will you be expanding into wholesale going forward?
Look, wholesale is used very loosely. What we've committed to do with Caltex is really leverage all of the learnings out of our existing Metros to deliver a great experience onto Metro at Caltex. Most of the products there will actually be fresh products with a lot of grab-and-go elements to it. And our FoodCo capability on really getting these fresh products and giving -- whether it's salad meals or sandwiches or whatever the case may be, breakfast on the go, right? So a lot those products will come really out of our FoodCo, all the development we're doing inside FoodCo. And that's really the core of what we'll be able to deliver, hopefully, in a very pleasing way into our Metro at Caltex. And leverage off, David, if you've been down to see what we've done in Pitt Street or what we've just opened in Kings Cross last week. So that's the core of it. Around it, though, we are looking to what other products we can wrap around it so that we can make the experience seamless for the store team. And what we know in Supermarkets and it's even doubly true in the Metro is that a lot of DSD deliveries do make it a very hard process to manage in a very tight backroom. And so how we enhance the overall FoodCo offer with related wholesale products is something we're actively working through right now with Caltex and with our supplier base. But the major action, of course, is to activate Metro. Most of that, actually, is going to be in food on the go, and we'll leverage off FoodCo. So you could call it wholesaling in a way, but to me it's a slightly different category. And it's all part of the megatrend related to your -- the comments on digital on our customers are looking for convenience in every aspect of their lives. And that's clearly an unmet need or a growing need in Australia which this -- the concept we have with Caltex should fill.
The next question comes from Andrew McLennan from Goldman Sachs.
Can I ask just a question around that improving trend from a comp perspective and how it was -- how it's manifested in the drivers and Voice of Customer. You saw a hit over the -- in sales, obviously, over the first quarter, but a recovery towards the end and into October. I'm just wondering in terms of those key drivers, in terms of basket size transactions, et cetera, have they all come back across the board or are there areas where there's still a response needed?
Yes, yes. I mean, there's always work, to be honest, Andrew. So -- and we -- obviously, we look at all the customer trends and then we also look at the trends by customer segment as well as you can imagine. So over the quarter, really, what was very pleasing to us is that not only did our Voice of the Customer and brand metrics remained relatively stable despite the fact that we were getting a lower sales growth. But what was interesting is that our main shopper brand metrics were particularly strong, and so the core shopper at Woolworths continue to see the value we were delivering and continued to reward us for that. It was our noncore shopper that really we started to see a little bit of slippage, not much, in the coming of it. As we cycled out of the continuity program, we started to see that noncore shopper start coming back and shopping us, and we're starting to see an improvement in the metrics related to that. So that's been the macro trend we see. In terms of the subsegments that sit within there, if you look by last stage, the key shopper who did some more core shopping during the continuity portion of the quarter was really a new and young family as you might readily imagine to participate in the collectibles program. Both segments are coming back to Woolworths, but we still have some more work to do in getting ready to fully balance on that. And as you might imagine, it is a real area of focus for Clare and the team.
Yes, okay. That's excellent detail. And New Zealand, spectacular growth in online. You guys have the commanding online share of the market, given the relative lack of participation from your major competitor there which is changing, obviously. But a very strong result. Was it all implementation of Click & Collect or was there something else going on there? And also, can you give us an update on where the online penetration rate is in New Zealand?
Sure. Look, we do have a strong structural position in New Zealand in online, but I think a lot of the growth actually was, thanks to the team, really leveraging off some of the learnings from WooliesX, looked in that customer experience. To me, that was key to get to, and we called out, the 40% growth. So I think it is a combination of factors and leveraging the learnings we started to build as a group in the space which is key to our strategy. In New Zealand and in Australia, the majority of growth was driven by pickup and providing a much better pickup experience and the collaboration between CountdownX and Countdown Supermarkets. So that was the real engine of the growth that we saw there. And the competitor is not -- does have a series of losses in market. So it's not in an environment that doesn't lack competition. So it has been a strong quarter there. We don't call out the penetration number at this stage. And the guys are shaking their head at me to report it. But over time, we'll work towards providing more clarity and transparency on those.
The next question comes from Phillip Kimber from Evans & Partners.
I just wanted to clarify, if you could, your comment around market share broadly returning to 4Q '18. Was it -- basically are you saying now that your sales growth, as we come out of the first quarter, is in line with market growth? And I guess what market growth are you referring to?
Well, that's a tricky one, Phil. By implication our sales growth has been ahead of market growth for us to have got back to the market share position we had in mid-June before we went into the phase out of single-use plastic bags. But as I said, I did make the comment in a broad sense that it would be fair to say, as we look across the economy, there's been a relatively subdued quarter on the consumer side. So we have grown ahead of that as we've bounced out of -- as we should have actually, as we've bounced out of the continuity program.
And that's the idea, sort of just to sort of clarify that for us.
Yes, there's a lot of -- it's kind of -- it's always very hard to -- we look at a whole range of metrics IRI, Nielsen, ABS. They're all varied somewhat, but they're all broadly in line with each other.
Okay. And then I guess my second question was just on the trends you're seeing in the consumer. You said that first quarter was a bit subdued if we got out of the sort of staples type businesses and took a more discretionary business. Have you seen any noticeable impact in the last month or so in terms of either foot traffic or customer spending patterns that's worth calling out?
No. And I used the word subdued very deliberately. It's not that it's -- it's just a broad issue really that we see on the East Coast. And there's been a number of factors in our business that made -- I mean, it's very hard for us to be very precise. As you can imagine, with these continuity programs, it's hard to be definitive. And it's always a funny quarter as you come out of winter anyway, it's -- as you get into these shoulder seasons. But the inclement weather we've experienced, and I don't want to overplay it, but we have had incredible differences in the weather pattern in Q1 to the same period last year. And somewhere in the order of 6% to 8% weather differences in New South Wales for material chunks of time. So that clearly has had a somewhat of an impact on overall entertaining and customer spending.
The next question comes from Ben Gilbert from UBS.
Just some for me. Just around operational activity in the market, just how you're seeing that at the moment. And Brad, particularly I'm interested around sort of share basket on promotion, how much success you're having sort of reducing the promotional breadth in market and to what extent you think that's driving some sort of easing deflationary trends in dry?
Thanks, Ben, a really good question. So if you look back on Q1, and this is our take on Q1. I'm sure everyone else will have their own variant. We actually reduced the number of promotions we ran in Woolworths Supermarkets, and I assume that's what you're alluding to. But it would be fair to say we had a slightly deeper promotion as we were cycling continuity. So it was a very deliberate -- we had less promotions but slightly greater depth in those promotions in Q1. And that's on our yellow program. We continue to expand our red program which is our sort of EDLP program going parallel with that. So how you want to sort of un-tick those 2 is the key. And I think we added another 280 products to our red, or EDLP, program during the quarter. So we were slightly deeper but materially less number of promotions but also growth in the red program and resonance with our customers with that program. So that was the story of Q1 in really in long life. In fresh, the key thing there was seeing produce move out of being deflationary to being relatively flat from the way we measure it. So you would be aware, we called out material deflation across F '18, but I think it was about 9.1% somewhere thereabouts in Q4 of F '18. We saw that come to about a 0% growth in terms of inflation. Deflation, a little bit of a price lift in bananas, a little bit of a price reduction in avocados. So movements by core categories, but on average, 0 setting on deflation. Surprisingly, despite the pressure we've seen in meat input costs, meat was still slightly deflationary in Q1 despite the pressure we've seen building on the input cost side, in particular, in lamb but now increasing across all of the other protein types. So that was Q1. As we go into Q2, there's nothing I would specifically call out. It's always a competitive market from where we sit and we continue to work on all aspects of our price index. It is worth me also just calling out, not only do we try and focus on the index against our traditional grocery or food competitors, we also need to keep a half an eye to areas that we want to create additional value for our customers. And 2 of the more material deflationary areas for us in long life were in health foods and what we call international foods or ethnic foods. And those are very deliberate decisions we made to try and drive more value for our customers on things that are very important to them.
Okay, and just the second one for me. Just interested in sort of how you're seeing the consumer trends out there because I think what we obviously saw with Little Shop is just how promiscuous the shoppers are at the moment and willing to sort of switch back and forth. How progressed you are in terms of driving differentiation? You're obviously investing a lot of money in stores, but do you think you're getting the results and are actually able to sort of create stickiness with the customers. And following on from earlier question, just how you're seeing perception of your loyalty program versus FlyBuys, et cetera, in the market as well.
Yes, look, what we found over the quarter, as I said, just coming back to the comments I made a minute ago, was our core shopper really appreciated what we did in the quarter in truth and we saw a real strengthening of the metrics in regards to that core shopper, and they gave us the credits for the efforts we are putting into fresh or health or international food as well as into community or into the environment. So we really did start to see our core shopper differentiation materially lift. So we have a lot -- done a lot of good work on that. The noncore shopper is the one that we really need to, of course, get more of the noncore shoppers to become core shoppers. And that's where our focus is, right now, in particular, as they cycle out of those continuity programs and they come back and experience everything that Woolworths has to offer. So that's the focus for us in H2. Now our loyalty program has a role to play. It is not the core to that. The core to that, of course, in general in our business is the in-store experience and the experience that customers get when they come to our stores and the way our team engage with them in our stores, and a real big area of focus for Christmas. But it does have a role to play. We have improved the customer experience in rewards. But in truth, we've still got a long way to go, and we're pretty excited about that. Having Caltex in our program is really important to us. It does increase the level of spend that qualifies for rewards benefits for our customers. And so we launch that on the 7th of November, so really, really excited by that. Really excited by the interaction between rewards and BIGW and BWS as well and how we're really getting that part of the program to work. So some really good aspects to it. But when we benchmark ourselves against where we want to get to, there's still enormous opportunity for us. So we're not anywhere where we'd like to get to at this stage. But it is part of it, but not the key to it.
The next question comes from Grant Saligari from Credit Suisse.
Brad, earlier this quarter, you called out and signaled that Coles was a lot more active on price-based competition in the quarter than it had been in prior quarters. And I think you basically, sort of reaffirmed that in your comments on meat and cost of goods relative to price comments earlier. Can you comment on whether that level of price activity is continued through the quarter? And just any general comments around the level of competition at the moment.
Thanks, Grant. That's the problem with talking too often to people and they take god notes of whatever was said in the prior period. But my comment really was in looking at the first couple of weeks of the quarter and not holistically looking back on the quarter. It would be fair to say we saw slightly less promotional activity from our -- one of -- a core competitor during the quarter as the Little Shop program ran. And I think that was called out in their own announcement. And of course, we went slightly deeper on our promotions in that part of the quarter. So we did see that's soften somewhat. But we're now back to what is the competitive environment we're used to experiencing, which is really is the way it should be and it delivers great value for consumers. So that was certainly true from my comments from the first couple of weeks. But as I said, that did change and now we're back to, in truth, the way that we've experienced the world for the last 24, 30 months. The thing I would call out that has happened is material increased investments which we had called out before in below-the-line promotions driven through the reward program of our core competitor. So that certainly has ramped up and is something we continue to focus on.
Okay. I would like to ask a question around fuel, if I could. We've had a couple of days full of fuel. I mean, your fuel volume is down 10%, and that's not uncommon amongst the majors in the market. But for a number of quarters now, you've called out that it's competitor site growth. And we're talking about the independents becoming more active in the market. It just feels to me that you and perhaps the other majors are quite happy to cede volume to the independents and are taking more of a margin optimization route. I'm just wondering whether that's the correct interpretation and whether that's just a function of the pricing cycle we're in at the moment. Just interested on your views or your...
It's quite a tough one. I think we try and measure by quantum share of the majors versus the independents as well as of course how our own share is trending. And our aggregate view is that the majors have lost share to the independents, but the primary way that, that has happened is through new site openings versus a comp movement. So that's really been what we've seen. And one of the reasons we have lost the share we have is obviously we've been in discussion with a variety of partners, and that led to us pulling back on our new store opening pipeline. So -- and it is what it is, and we can't unwind what we did over the last couple of years. So that's really been the macro trend we've seen. Certainly, our view has been that a very competitive fuel price at one of our canopies is central to our core value proposition, whether it's through the headline price or then the incremental $0.04 discount that one of our customers can get if they spend $30 in our stores. So we are very focused on making sure we stay competitive on that.
The next question comes from Scott Ryall from Rimor Equity Research.
Brad, I was wondering just looking at a bit of introspection, I guess, over the last 6 months or so. You've called out a number of, what I would call, external factors, including plastic bags, given your major competitor changed their strategy quite materially over the quarter. So I was wondering if there's anything that you feel like Woolworths itself could have done better, please, because certainly, there's no shortage of people willing to discuss some of those shortcomings. And I guess combined with that, your grocery deflation, you called out total, and total excluding tobacco, but make the comment that fruit and veg prices were flat, which gets you over 3% and closer probably to 4%. And Coles in the first quarter reported grocery deflation ex fresh, ex tobacco of 0.8%. So I wonder, is there a connection between those 2 being quite a wide deviation and what you could have done better? And I guess what you've turned around for September and October, what you've learned from that? That would be great.
Look, Scott, there are many things we could have done better. And we don't like introspections. We're trying to make it a key part of the culture of Woolworths that we learn from the things we haven't done as well as we could have. As per the comment, going all the way back to Shaun Cousins' opening question on the Voice of the Supplier. So we're always looking and trying to take corrective action. And there are many, many things we could have done better. One of the questions I'm sure will be asked in media call is, do we regret phasing out single-use plastic bags, and the answer is no. But there sure is heck a number of things we would have changed in the way we did that to ease the pain for our customers or for our team. Now some of those learnings have helped us in New Zealand to go through it as a new seamless process, but we would have changed a number of those things as well as many, many other things. So we don't feel we followed the wrong strategy through the quarter. But in terms of some of our tactics, clearly, benefit of hindsight, we would have changed -- would have change a lot on the way through. The one thing I did want to call out on that was -- what I was proud about our team was that where I feel we bring ourselves undone is if we had -- when we over respond but we don't stick to our own plan. And it was a hard quarter to stick to our plan. My hope and belief is that by sticking to our plan over that quarter, it will set us up for the second quarter because that's the key quarter. So a lot of our conversation was if you deviate in an unplanned way, you don't really execute. And so I'm really -- would call out, I'm pleased with the team, as strange as it may sound, we're never happy with the numbers, but pleased with the team sticking to the plan because I do think that sets us up for what is a critical, critical second quarter. On deflation, really, I can't -- and this is often a question that comes up comments on how our competitor measures inflation, deflation. The only thing I can assure you and especially when you see it in our half year numbers is we have been very consistent over the last couple of the years about the way we measure it and, therefore, the way it looks. So hopefully, our numbers are intuitively logical, especially if you line them up over the last couple of years. So to me, that's key. I'm sure Paul van Meurs, offline, can explain the Fisher methodology we use. And so it is consistent for us. If I then go back to the numbers, as we discussed, and we did see deflation come back. It really was the story, as I said, on - there's lots of moving pieces there, right. But it really was a story of produce or fruit and veg going out of this material deflation we saw on the back of Cyclone Debbie in F '18 and go back to a neutral setting, on average, if you do a volume weighted index on the 2. And then if I go back to what happened in grocery, really, there's many ups and downs, but it was some very deliberate investments in health and in international foods. And the other one I should call out is Health & Beauty and our need to continue to work on our price index in Health & Beauty, not only against our traditional food competitors but sort of the discounts, chemist segments as well. So very deliberate there kind of investments. I don't know if I can add a lot more, I'm happy -- if you have any other specific questions on it.
The next question comes from Richard Barwick from CLSA.
I just want to pick up on one of the comments in the release within Endeavour Drinks talking about a slowing in the market growth across the quarter, particularly in wine. So just wanted to see if you got a bit more color around that in terms of describing what actually went on and how much of a concern it that? Obviously, the second quarter is key for lots of categories, but it's particularly key I would've thought for wine and spirits. So just some thoughts there, please?
Yes. Look, I mean, the liquor market, in general, was pretty subdued in Q1. It's a somewhat winter-driven. But the wine segment was the one we called out of being slow. It's not a -- traditionally, the strongest growth quarter for wine, it really is Q2. The segment that was particularly subdued for us in Q1 was sparkling wine. And obviously, that does change as we get into Spring Carnival and the run into Christmas. So yes it was just subdued. As of -- we actually grew share in the quarter, but we weren't happy with the overall numbers as reflected in our sales performance so.
Right. Okay, that makes sense. If you're talking weather in sparkling wine, sort of going hand-in-hand.
In particular, I mean in the overall segment. But that was the major subsegment that was challenged.
Got you. And can I just ask a little bit more around the online sales. Are you prepared to actually give us a split of your delivery versus the Click & Collect. I know, obviously, you're skewed towards the Click & Collect, but just a more defined split? And then -- because where I'm going with that is, I mean, clearly you're getting really strong growth in online. How do we -- or how should we be thinking about that as an impact on margins? So I would imagine that Click & Collect would be more profitable than delivery, but where increased sales in online actually sort of has an impact across overall margins, just a sense there.
Yes, look, we don't break it out, Richard, but just a couple of points of color. Pickup is clearly a lower cost for us because it just -- we get the efficiencies inside the store, and we don't have the cost of the truck roll to the home. So it is a more cost-effective solution. It does meet a very different customer need, however, and it has a materially smaller basket size. So you do get some basket benefits on the truck roll to the home. And our strategy has been to really make sure we provide all opportunity of ways for our customers to shop us. And we have been trying to lift our pickup penetration in our business, and that's been the cause of growth across every one of our businesses, whether it's Woolworths Supermarkets, Countdown, Dan Murphy's and, to some extent, BWS, although that's a small part of BWS and, in fact, BIG W as well. So it has been the major source of our growth. The penetration there is by our businesses so we don't break it out. But as I say, it's not that straightforward that pickup versus home delivery is better. One has lower cost but the other has a lot bigger basket. And the other thing I would just call out, the economics of home delivery are still revealing themselves and pickup to some extent. These are now becoming material businesses. And we started to get much better at the productivity that we are getting out of these businesses as we focus on them, we treat them as industrialized processes. So a lot of work is going on and -- in trying to optimize those processes. So it is a work in progress is the other comment I'll make.
Okay. And can you just -- can you give us an update, how many or what proportion of your stores across the businesses are set up or enable pickup?
If someone's going to say to me, "One store isn't." But I would make the assertion that every store in Woolworths is pickup enabled, but there's going to be some notable exception somewhere.
Okay. And that's true in Supermarkets or is that true across every format?
Everywhere.
Okay, all right.
Our Metro stores aren't yet pickup-enabled the team is showing the sign to me. But everything else, so I'd say 99% of our stores are pickup-enabled.
The next question comes from Johannes Faul from MorningStar.
I had a question around BIG W and the strong online growth that you had there. So obviously, I don't think you give online penetration, but let's say, it's low single digits. This still means that, I think, the in-store like-for-like sales growth would have been negative. And if that really is the case, how do you think about rationalizing your footprint, store closures? I think one of your competitors has already flagged they're going to close 20% of the footprint over the next 5 years. A good color around that would be great.
Yes. Look, while we have very strong online growth in BIG W, it is off an incredibly modest base in truth. So we don't really call it out, but it was -- it's a very modest business, but obviously showing explosive growth off that. The vast majority of that growth, I should add, is pickup and it is across the rest of the group and in line with the answer to Richard's question. So -- and pickup has a slightly different role to play in a BIG W than it might in supermarket because it often can be a version of securing your special product on the toy sale or whatever, so that adds a lot of value. And the customer in a BIG W does come into the store to do the pickup. And so you get a very different cross-shop potential than you do in a pickup, in particular, through a drive on a supermarket. So we don't break it up, but I wouldn't over-read our comments on the strong growth. It is off a small base. We continue, of course -- and David and the team continue to work very -- in a very focused way to make sure that we -- our store footprint is all right. And you would have seen we did close a few stores in the previous year. We'll continue to actively work and see what's right and what's the right opportunity for us going forward. But at this stage, our focus is on Christmas with our team and just getting our team focused on a great Christmas in BIG W given the incredibly important sales and profit time of the year we're now in, in that business.
Okay, great. And just on the Petrol IPO, is there any change in terms of timing around -- I mean, you've called out that there's been some progress there. What exactly has that been, the progress?
Look, it is still work in progress. So, as you know, we're working through a dual track process, and it continues to progress. Obviously, a lot of volatility out there in the equity markets, but we continue to progress the process. So I think that's all I can say at this stage, in truth.
The next question is a follow-up from Michael Simotas from Deutsche Bank.
It seems very likely that your major competitor will embark on another continuity program, and it might even happen before we talk to you again in late February. Not expecting you to tell me what your plans are, but how confident are you that you'll be better prepared to weather it with less of an impact than you were last time around?
Thanks, Michael. We've run a lot of continuity programs at Woolworths as you may be aware. 2 of them had extensions into Christmas, Super Animals and Ancient Animals. So we have some learnings that help us inform these things. So we're working very hard on making sure that we have the best possible Christmas and provide the best possible experience to our customers. But the possibility of this happening is not something that should be discounted. But as I said, we've got a learning culture, and we've learned a lot and feel we've got a really great plan.
At this time, we're showing no further questions. I'll hand back to Mr. Banducci for closing remarks.
Thank you, everyone, for joining us on the call this morning and all of the questions. Obviously, we're already a month into the critically important second quarter and look forward to speaking to you at the end of January on H1 and, not only sales, but profit. And as always in our business, I encourage you to shop our stores, the truth is in the stores. And that's the best way to get a sense of what we're up to. And bring your families. Thank you.